Paying Yourself from a Bulgarian EOOD as a US Citizen: Salary, Dividends & GILTI (2026)

You own 100% of a Bulgarian EOOD. The company made a profit. Now what?

As a US citizen this decision is not just "salary vs dividend" - it is a three-way pull between Bulgarian payroll rules, Bulgarian corporate + dividend tax, and the US GILTI regime that taxes your share of foreign corporate earnings whether or not the company distributes them.

Get the mix right and your all-in effective rate on operating income lands around 20%. Get it wrong and you can end up over 35% - worse than just staying with a Delaware S-corp.

The three cash paths out of an EOOD

1. Director salary / employment income - taxed as Bulgarian wages: 10% flat personal income tax + social contributions (capped, so at high salaries the marginal rate falls sharply).
2. Dividends - after 10% corporate tax, distributions are subject to a 5% Bulgarian withholding tax. Simple, cheap, and treated as qualified dividends on your US 1040 (Bulgaria has a US tax treaty).
3. Undistributed profit - stays in the company. Bulgaria has already taken its 10%. The US, however, does NOT wait for a distribution: GILTI taxes your pro-rata share of CFC earnings on your personal return in the year they are earned.

Understanding path 3 is the entire game. There is no "leave it in the company and pay no US tax" strategy for a US owner. GILTI closed that door in 2018.

What GILTI actually does to you

As a US shareholder of a CFC (you own >10% of a foreign corporation controlled >50% by US persons - a solo EOOD ticks both), you must include your share of the CFC's tested income on your Form 8992 each year.

For an individual US owner without additional planning, GILTI is taxed at ordinary rates (up to 37%) with no foreign tax credit and no 50% deduction (both of those are C-corp-only benefits by default).

The two workarounds worth knowing:

• Section 962 election: you elect to be taxed as if you were a C-corp for GILTI purposes. That unlocks the 50% GILTI deduction and the foreign tax credit for the Bulgarian corporate tax. Net US federal rate on GILTI drops to roughly 10.5% before credits, and to near zero after crediting the 10% Bulgarian tax. But when you later actually distribute the profit as a dividend, you pay US tax again on the distribution (minus the 962 basis you built up). Powerful, but the annual math is not casual - budget for a US international CPA.
• High-tax exception (HTE): you elect to exclude CFC income that is taxed abroad at more than ~18.9% (90% of the current US corporate rate). Bulgarian corporate tax alone is 10%, so on its own the EOOD does not qualify. Add the 5% dividend withholding and structure profits properly and some slices of income can qualify - but do not plan on this without a CPA modelling it.

The mix that usually wins for a solo US owner

Assuming $200,000 of pre-owner-comp profit and that you qualify for the FEIE (330+ days abroad):

1. Pay yourself a director salary up to the FEIE ceiling (~$130k in 2026). FEIE zeroes the US federal income tax on the wages. Bulgaria takes 10% + capped socials.
2. Take the remaining ~$70k as dividends: 10% BG corporate tax → 5% BG dividend withholding → qualified dividend rate on US return (0/15/20% depending on total income) with foreign tax credit for the 5% BG withholding.
3. File Section 962 anyway in years where remaining profit sits in the company at year-end - it protects you from the punitive individual GILTI rate on any residual undistributed earnings.

All-in effective rate on the $200k: ~15-20% vs ~37-40% at a Delaware LLC. That is the whole reason this structure exists.

What breaks the plan

• You do not qualify for the FEIE. Then the salary pathway loses its magic and Setup A above collapses to roughly Setup B: ~25-30% effective. Still better than Delaware, but the gap narrows.
• You leave everything in the company. GILTI hits you on the full retained profit at ordinary rates. You pay Bulgarian tax + US tax and end up worse than a Delaware C-corp.
• You skip Form 5471. Penalty: $10,000 per form per year, with additional $10,000 increments for continued failure. This dwarfs every tax saving.
• You take a "loan" from the company instead of a dividend. The IRS will recharacterize it as a constructive dividend, plus you may trigger Section 956 (investment in US property by a CFC) which pulls the amount into current US income anyway.

Order of operations each year

1. January - agree director salary with your accountant based on FEIE projection and cashflow.
2. Monthly - run Bulgarian payroll properly (this is what makes the salary "wages" for FEIE).
3. Q4 - decide dividend size based on year-to-date profit; declare before year-end so the 5% withholding lands in the right tax year.
4. February-March next year - Bulgarian annual corporate return + US Form 5471, 8992, 2555, 8938, FBAR. Make the 962 election if it helps.

Our take

The Bulgarian EOOD is one of the best available structures for a US-citizen expat earning $100k-$400k of active service income. But it is not a "form the company and forget it" play. The tax saving comes entirely from actively managing the salary/dividend/GILTI mix each year, and from filing every US form on time.

If that sounds like more paperwork than you want to deal with alone, it is - which is exactly why a US international CPA and a Bulgarian accountant working together are non-negotiable at this ownership level. Budget $4,000-$8,000/year for the pair. Below that you are cutting corners that will cost you multiples of the fee.